LVMH Boosted by China Demand as Louis Vuitton, Makeup Surge

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Photographer: Andrew Harrer/Bloomberg

LVMH continues to get a boost from a luxury rebound in China, with demand for Louis Vuitton handbags and Dior perfumes racing ahead in the holiday season.

Fourth-quarter sales rose 11 percent on an organic basis, the Paris-based owner of luxury brands including Fendi and TAG Heuer said Thursday after markets closed, beating the median analyst estimate of 8.9 percent in a Bloomberg News survey. The stock rose as much as 3.7 percent Friday.

“We benefited from a highly dynamic Chinese market, which has continued to be the case in the very beginning of 2018,” Chief Executive Officer Bernard Arnault said at a briefing.

The performance of every division matched or beat estimates in the period, with the company citing rapid gains for cosmetics and makeup in Asia over the full year. Sales at French luxury conglomerates LVMH and Kering, the owner of Gucci, have been surging ahead of smaller competitors as investments in updating their products and reaching out to consumers online pay off. China has re-emerged as the industry’s growth engine after luxury sales slumped during a multiyear crackdown on corruption.

LVMH’s full-year profit from recurring operations rose 18 percent to 8.3 billion euros ($10.4 billion). The company said it’s “cautiously confident” for 2018 despite “unfavorable currencies and geopolitical uncertainties.”

Less Upside?

“After the strong outperformance in share price since 2016, we see less potential upside in 2018,” wrote Hermine de Bentzmann, an analyst at Raymond James. “It will likely be difficult to duplicate double-digit growth levels across divisions and an underlying margin jump.”

One boost may come from Hedi Slimane after LVMH announced Sunday that the designer would take over its Celine brand, scaling up the womenswear label with new products including menswear, perfume and haute couture.

“He has a strong track record,” wrote John Guy, an analyst at MainFirst Bank, citing the designer’s turnaround of Kering’s Saint Laurent and relaunch of Dior menswear in the early 2000s.

Arnault said he’s aiming for Celine to generate 2 billion euros to 3 billion euros in sales within about five years, up from a current level of nearly 1 billion euros.

Last April, LVMH agreed to pay around 6.5 billion euros to take full control of Christian Dior, the fashion house Arnault had kept in a separate holding company since the 1980s.

The CEO repeated his amazement at negative interest rates and the ease of borrowing. “Equity prices are stratospheric,” Arnault said. “We’re in a period of total irrationality.”

By Robert Williams Courtesy Bloomberg

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